I spend most of my time digging into Wall Street, hedge funds and private equity firms, looking for both the good and the bad. I also focus on the intersection of business and the law. I have worked at Forbes since 2000.

Stephen Schwarzman, the private equity billionaire chief of the Blackstone Group, declared war in August 2010. Since then Blackstone Group’s stock has returned 130% and Schwarzman’s effective tax rate has barely risen at all.

For a while after Schwarzman compared President Barack Obama’s desire to increase taxes on private equity to Adolf Hitler’s invasion of Poland, Schwarzman seemed to be losing his war. He was forced to apologize for his “inappropriate analogy” and the private equity industry found itself in the middle of a very ugly public battle. Many prominent private equity chiefs loudly opposed Obama’s plan to increase the lower taxes on carried-interest profits generated by private equity. The fight became even more nasty after Mitt Romney, who founded Bain Capital, one of the nation’s biggest and most prominent private equity firms, became the Republican nominee for president. As part of their campaign, Romney’s Republican opponents called him and other private equity investors vultures and Obama and his supporters bashed Bain and the private equity industry in general, painting them as rich “vampires” who fired workers and didn’t pay their fair share of taxes.

After Obama beat Romney decisively in November, the private equity industry braced for potential retribution, especially given its overwhelming financial support of Romney. To many, it seemed like private equity money managers might soon be forced to pay higher ordinary income taxes on their rich performance fees as opposed to capital gains taxes.

But nearly three years after Schwarzman’s war declaration, it seems like the private equity crowd has snatched victory away from the jaws of defeat. The carried-interest tax treatment has survived. The top rate for capital gains has increased a bit to 20% from 15% as part of the deal a few months ago to avert the fiscal cliff, but that is small potatoes for private equity. While some kept thinking Washington would revisit the issue, there seems to be no appetite there to target carried interest. President Obama has put forward a budget that would change the way private equity profits are taxed, but it does not appear to be much of a threat.

David Rubenstein, a co-founder billionaire of the Carlyle Group and a prominent figure in Washington, indicated in an interview with The Wall Street Journal this week that the political threat to private equity is over for now. “They are worried about the NSA, they are worried about the IRS, they are not worried about private equity, so I don’t really think we will see any major regulatory or legislative focus on private equity right now,” Rubenstein said. “The climate in Washington is not great, but for private equity it’s, I would say, benign, nobody is focused on it.”

The magnitude of private equity’s victory goes beyond politics. In the summer of 2010 the private equity industry was on the ropes, the shares of the few listed private equity firms were languishing and the hopes of other major firms to go public seemed dim. Valuations of many private equity portfolio companies were depressed.

These days, however, with the tax issue behind them, the buyout business has become a winner again in financial markets. Private equity shops have been able make big exits from many of their investments, either by selling ownership or borrowing money at cheap rates to fund rich dividends. These money managers have also been able to refinance the debt of their portfolio companies on very favorable terms, putting those investments on more sound footing.

The result: some big listed private equity firms have seen their stocks soar–and not just Blackstone. Apollo Global Management, the private equity firm that saw its shares slide after it finally managed to go public in 2011, has seen its stock rebound above its IPO price and continue to rise. Since Obama was reelected in November, Apollo’s stock has returned 82%. KKR’s stock has returned 40% since the election. Carlyle, may not have performed as well recently, but it has still seen its shares post returns of 9% since the November election and its post-IPO performance is solidly in positive territory.

The Master’s of The Universe have yet again found a way to come out on top.

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The “carried interest” break is not some obscure loophole, it is based on fundamental principles of partnership taxaton, so the legislation to fix it proposed Code Section 710 is pretty ugly and could harm other players and might be worked around by the larger players.

Some argue that the benefit could be attacked by regulation which would be simpler and more direct. It would also be totally under the control of the administration

Interesting thoughts . There’s a survey on Private Equity that readers may be interested in It offers insights from private equity fund managers and PE executives on the state of private equity and what PE firms are doing to maximize value @ http://bit.ly/1928UPh